New Way to Prevent Hedge Fund Redemptions

Over the years hedge funds have come up with various redemption policies. Most allow quarterly redemptions of some sort, but some funds, especially those taking positions in hard to price illiquid securities, prevent redemptions for two years or more. One of those funds, Polygon Investment Partners in London, has a novel way to satisfy investors that are demanding liquidity - allow them to redeem their investments at a 25% discount to NAV. The hedge fund in question, Polygon's $3.7 billion Global Opportunities fund, lost 48% in 2008 and would otherwise not allow redemptions until 2012.

With regard to Polygon's offer of redemptions at a 25% discount, Founder Paddy Dear said “We are pleased to have been able to offer this opportunity to those of our investors that had an immediate need for some liquidity."

Polygon Investment Partners has $5.3 billion in Assets Under Management (AUM).